Choosing the unclear option

NIKKY decides to renovate her home. Plans are drawn up, which include the addition of a loft and a master bedroom.

Nikky takes the plans to Mutually Assured Construction Pty Ltd, a building company specialising in residential renovations. MAC has one employee, John, a licensed builder.

Nikky informs John she has an owner-builder permit and she plans to assist with the renovations by engaging contractors to do specialised work, including laying the slab, the electrical wiring, the brickwork and plastering. She requests the builder do everything else.

John agrees and proposes to work on an hourly rate plus materials, payable every four weeks.

Nikky agrees and they enter a handshake deal.

Work begins a week later and all appears to be progressing well.

Towards the end of the renovations however, Nikky becomes concerned about costs and the quality of the work. She waits until the work is finished then does not pay the builder's final invoice, which comes to $40,000.

After some sternly worded letters are exchanged, the builder starts proceedings in the New South Wales Civil and Administrative Tribunal and Nikky makes a cross-claim for defective work.

Both parties engage solicitors and file expert evidence, then the dispute proceeds to hearing.

The tribunal member finds the builder breached the Home Building Act 1989 by not entering a written contract and not obtaining home warranty insurance. Because of this, the builder is unable to claim under contract.

However John makes a "quantum meruit" claim on the basis it would be unjust to allow Nikky to gain the benefit of the work without paying for it.

The tribunal member finds in favour of the builder and orders Nikky to pay $40,000 less the rectification cost of $20,000.

Both Nikky and John incur substantial legal costs of about $30,000 each.

The tribunal orders the parties bear these costs themselves.

Had the parties engaged solicitors earlier, the dispute may have been settled without resorting to litigation.

If you would like Manny to address a particular legal issue, send your request to manny.wood@ or phone him 6648 7487.

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